The "bonus cap fix" for CA EDD
The Federal unemployment insurance bonus is great but may create a cashflow gap for certain situations. Here is how "the bonus cap fix" would work to fix the undesirable effect of the $300 bonus (this is explained using the CA EDD but it can be applied to the other states*):
* though the difference will probably be least in AZ, GA, HI, FL, maybe IN, LA, MD, MS, NY, and WV according to: https://fileunemployment.org/unemployment-benefits-comparison-by-state/
Right now, the $300 bonus is not given if an employee earns a threshold amount that is based on WBA (WBA = Weekly Benefit Amount in CA) via a formula. That creates an unfair gap of cashflow esp. for someone who works with low WBA and they can make more money by not working. That is an unfair situation! There is a simple fix which will NOT overburden the CA EDD with a complex implementation, "the bonus cap fix": Simply, add the bonus to the WBA amount that is taken as a basis to calculate the cap, but ONLY to determine whether someone gets the bonus or not. Right now, the basis for the bonus cap is the WBA. In the bonus cap fix, it is WBA+bonus, that is: WBA+300. (This doesn't change the partial regular benefit someone gets, so we don't overburden the CA EDD with changing their regular benefit calculations!) This will remove the gap, so a person will never have less cashflow by working. They will always (almost always in some states) have more cashflow if they work, where the percentage depends on the specific numbers. In CA, they will continue to get this extra cashflow until they make ~33% more than what they would get from unemployment with no work (due to 1/0.75 = 1.333).
Example 1: Mary's WBA is $150. If Mary works, she will make $250/wk. If she doesn't work, her weekly cashflow is from EDD only: 150+300 = $450. If she works: Without the fix, she gets $0 from EDD and $250 from work, for a total weekly cashflow of $250. Her cashflow decreases $200 if she works. (How unfair!) With the fix, she gets $300 from EDD (because [150+300]/0.75 = 600 > 250, so she WILL get the $300 bonus but no partial regular benefit because we don't touch that calculation: 150 - 250*0.75 < 0). Then, her weekly cashflow will be 300+250 = $550. In other words, she will be rewarded an extra $100/wk for working (550-450). This results in the same or better incentive if the bonus was part of WBA ( 300+150=450, then her weekly benefit would have been 450 - 187.5= $263, which is less than the $300 she would get with the bonus cap fix).
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last updated on: 6/6/2021